Day 43 - Responding to former state senator Karl Swan
In Sunday’s Tribune, former Utah state senator Karl Swan (D -Tooele) inaccurately disputed some comments made previously in the Tribune by House Majority Leader Rep. Dave Clark (R-Santa Clara).
Swan incorrectly suggested the following:
- False claim #1: Recent increases in Utah per student spending are possibly “no more than a maintenance of the status quo” because recent increases may not offset increases in enrollment and inflation
- False claim #2: Utah doesn’t need to double income taxes in order to reach the national average. (Actually, Swan employs a “straw man” argument and argues that Utah doesn’t need to double income taxes to make a “significantly stronger commitment” to public education, even though Clark’s original comment specifically referred to increasing Utah spending to the national average. Click here to read a good definition of straw man argument in Wikipedia.)
- False claim #3: The high percentage of public land ownership does not hinder Utah’s ability to fund education because Utah’s economy benefits from mineral lease revenues from federal lands and Utah receives payment from the federal government to offset the federal government’s tax exempt status.
We’ll address the first point next week in our Taxing Times newsletter once we receive the final budget numbers. However, one thing is clear at this point: recent education increases have been huge and will more than offset inflation and population growth.
What would it take to reach the national per student spending average?
Rep. Clark is right on this issue. Utah would need to double individual income taxes (or the dollar-equivalent thereof in some other form of taxes such as property taxes) to reach the national per student spending average. The math is very straight forward.
According to the National Center for Education Statistics (NCES), spending per student in 2004 was as follows
U.S. . . . . . . . .$8,310
Utah . . . . . . . .$4,991
Difference. . . . $3,319
Also according to NCES, Utah’s enrollment was 495,981 in FY04. Multiplying Utah’s enrollment by the difference in per student spending yields $1,646,160,939.
According to the Utah State Tax Commission, Utahns paid $1,699,183,228 in individual income taxes in FY2004. Therefore, adding an $1,646,160,939 to FY2004’s income tax collection would be a 96.9% increase, or virtually doubling income taxes.
Of course, the needed increase varies slightly from year to year, and the amount varies depending on whose numbers are being used (NCES, Census, NEA). Using the NEA’s numbers for FY05, the would-be increase in individual income taxes would be 92.7%, or nearly doubling income taxes.
A 96.9% increase in individual income taxes would be significant. According to calculations by the Utah Taxpayers Association, a Utah family of four with an income of $62,032 (the median income for a Utah family of four according to the Census Bureau), pays about $2,300 in individual income taxes under the system that was passed in the last special session (assumes deductions equal 20% percent of AGI excluding state income taxes paid). A 96.9% increase would mean that a typical Utah family of four would have to pay an additional $2,224 per year.
Property taxes would have to be increased on top of that in order to build hundreds of new school buildings to accommodate the additional teachers being hired.
What about the public lands issue?
Swan argues that Utah benefits from federal land ownership due to mineral lease payments and therefore is not being harmed by the federal government’s tax exempt status.
However, land is generally subject to property taxes even if it generates an economic benefit. For example, businesses are subject to property taxes (unless they get an RDA in which their property taxes are rebated back to the business) even though they create jobs, goods, and services and pay corporate income taxes and sales taxes on inputs.
Swan also mentioned that Utah receives in payment in lieu of taxes from the feds. In 2006, it was barely more than $20 million, a small amount considering how much land the feds own in Utah.
Finally, contrary to Karl Swan's claims, Rep. Clark's comments on New Jersey were not based on information that the Utah Taxpayers Association provided to him.